Small Activist Suffers 60% Drop on Puerto Rican Bank

A small sometimes-activist investor fond of citing pop songs in its filings has found itself on the wrong side of a Puerto Rico bank’s stumble.

Thursday, after market close, Attiva Capital announced a 5.03% stake in Puerto Rico’s Doral Financial Corp. in a filing with the Securities and Exchange Commission. The investor said in the filing it believed Doral was undervalued and, as it sometimes does, used a musical lyric to explain its beliefs.

“Puerto Rico’s economy is at a tipping point and it’s creating a lot of opportunities. Paraphrasing Alicia Keys in the ‘Amazing Spider-man 2’ song , Puerto Rico ‘It’s On Again,’” the filing said. “In our view, Doral Financial remains undervalued and could benefit from an increase in foreign and U.S. mainland companies investing in Puerto Rico.”

Within hours, the bank had its own bit of news that would send its stock plummeting 61% Friday. Attiva’s investment, worth about $3.3 million as of Thursday’s close, slumped to $1.3 million on Friday.

The bank said in a filing Thursday evening that the Federal Deposit Insurance Corporation told it tax receivables the bank holds shouldn’t be included in a key level of regulatory capital. That means that more than 40% of the bank’s capital ratio may not count, which in turn puts the bank in danger of violating a consent order and in need of a new capital plan.

“Doral Bank believes that as part of its capital plan it must seek immediate financial support from equity and debt holders and/or external sources,” the bank said in its filing. The filing also noted the bank believes the tax receivables should count as capital and it would discuss the matter with regulators.

In a post to Twitter Friday, Attiva reiterated its thesis.

David Tomasello, the firm’s managing partner said the investment was long term and that “the show is just beginning.” The family firm, he added, had several Puerto Rican investments. He declined to comment on Attiva’s size.

Earlier this year, Attiva announced a 5% position in sandwich shop Cosi Inc. and referenced pop singer Pink to criticize that company’s poison pill. Mr. Tomasello said the penchant for pop music citations is tied to an investment in Sony Corp., which owns the copyrights to those artists.

It has spent recent years pressuring Spanish Broadcasting System Inc. to break up. In a recent filing on that investment, Attiva quoted both U.S. President James Madison and South American revolutionary hero Simon Bolivar.